Best Practice Tips: Law Firm Merger Agreement

Asked and Answered

By John W. Olmstead, MBA, Ph.D, CMC

Q.Our firm, a 14-attorney litigation firm in Sacramento, California, is planning on merging/acquiring a three-attorney firm in the area. We have completed our due diligence and both firms have agreed on the terms of the merger. What type of agreement and legal documents do we need to effect and implement the merger?

A. If business law is not your forte, you may want to consult with a business attorney to determine the appropriate legal agreements that should be used to effect the merger. The agreement may be as simple as a letter of intent signed by the two law firms or a memorandum of understanding. It may also be as formal as a merger agreement covering the major details and terms of the merger that have been approved by required vote of the partners of both firms. This includes:

Merged firm name

Effective date of the merger

Method of integration, assets and liabilities contributed by each firm, and whether accounts receivable and work in process will be pooled and contributed

Management and governance structure and names of partners from each firm that will hold key management roles/positions

Compensation system for partners, non-equity partners, associates, and staff